Consumers are more in control than ever and savvier about filtering marketing messages, according to a report partly based on an IBM survey of digital media and entertainment habits. The IBM Global Business Services report, “The End of Advertising as We Know It,” forecasts greater disruption for the advertising industry in the next 5 years than in the previous 50.
Increasingly empowered consumers, more self-reliant advertisers and ever-evolving technologies are redefining how advertising is sold, created, consumed and tracked, IBM said.
Overview of report findings:
- Traditional advertising players risk major revenue declines as budgets shift rapidly to new, interactive formats, which are expected to grow at nearly five times that of traditional advertising.
- To survive in this new reality, broadcasters must change their mass audience mindset to cater to niche consumer segments, and distributors need to deliver targeted, interactive advertising for a range of multimedia devices.
- Advertising agencies must experiment creatively, become brokers of consumer insights, and guide allocation of advertising dollars amid exploding choices.
- All players must adapt to a world where advertising inventory is increasingly bought and sold in open exchanges vs. traditional channels.
Change Drivers and Trends
The report observes four change drivers tipping the advertising industry balance of power: control of attention, creativity, measurement, and advertising inventories:
- Consumers have tired of interruption advertising and are increasingly in control of how they interact, filter, distribute, and consume their content, and associated advertising messages.
- Half of DVR owners watch 50% or more of programming on replay; moreover, traditional video advertising doesn’t translate online: 40% of respondents found ads during an online video segment more annoying than any other format.
- Amateurs and semi-professionals are increasingly creating low-cost advertising content that threatens to bypass creative agencies, while publishers and broadcasters are broadening their own creative roles.
- Advertisers are demanding accountability and more specific individual consumer measurements across advertising platforms.
- Self-service advertising exchanges are attracting revenues that were once exclusively sold through proprietary channels or transactions.
Ad Experts’ Expectations in Line with Consumer Trends
IBM’s research found that advertising experts recognize the changing nature of consumers and also anticipate dramatic changes on the horizon:
- More than half of ad professionals polled by IBM expect that in the next five years open advertising exchanges (currently led by companies like Google, Yahoo, AOL) will take 30% of current revenues now commanded by traditional broadcasters and media.
- Nearly half of the advertising survey respondents anticipate a significant (greater than 10%) revenue shift away from the 30-second spot within the next five years, and almost 10% of respondents thought there would be a dramatic (greater than 25%) shift.
- Two-thirds of advertising experts surveyed by IBM expect 20% of advertising revenue to move from impression-based to impact-based formats within three years:
IBM Media & Entertainment Consumer Household Survey Finding Highlights:
- In biggest DVR market, users report extensive replay of television programming. This is resulting in ad-skipping and a revenue shakeup is coming unless producers and broadcasters reinvent marketing formats and messaging:
- 24% have a DVR in their home, and 48% have used video-on-demand from a cable company or other provider
- While 33% report watching more television content than before the DVR, 53% report watching at least fifty% on replay
- Users feel extremes regarding new forms of advertising. Marketers have to work harder than ever to understand individuals and micro-segments:
- Nearly 50% reported that video spots online – during, pre-rolled or as sponsorships – were the least annoying form of advertisement. Other formats tested were banner ads, pop-ups, and contextual search ads
- However, nearly the same level of consumers responded the same forms of advertising were most annoying online.
- Additionally, 11% said they’d be willing to pay a little for ad-free viewing of video online.
- US users report more usage of social-networking sites and user-generated content than almost any other content services category:
- 45% use social networking sites.
- 29% visit user generated content sites.
- 24% use a music service such as iTunes.
- 24% subscribe to premium television content.
- In progressive mobile markets, users report content service adoption and cannibalization:
- In the UK, 26% reported watching mobile video, including mobile phones and iPods.
- 73% reported using their phones for SMS; 16% reported using their mobile phones for gaming; 15% reported using their mobile phones for music; 15% reported using their mobile phones for sports, news and traffic; and 2% for television shows.
- For those in the UK who had watched mobile video, 18% said they reduced “normal” television by a little, and another 8% reduced “normal” television by a lot; 4% substituted television on their regular TV for use on their new device.
- For respondents in Germany who had watched mobile video, 23% prefer to view user generated content and 21% prefer video trailers or promotions.
- Japan lags the US and UK in social participation, reinforcing the need for media companies and marketers to localize by market as well as catering to individuals and micro-segments:
- When asked if they had already contributed to a social networking site, like MySpace or Xing, 9% of respondents from Japan reported yes, compared with 16% of US respondents and 20% of UK respondents.
- When asked if they had already contributed to video content sites, like YouTube, 4% of respondents from Japan reported yes, compared with 7% of US respondents and 9% of UK respondents.
- Australia, on the other hand, topped all countries surveyed with 30% contributing to social-networking sites and 9% to video content sites.
About the report: “The End of Advertising as We Know It” is based on an IBM global survey of more than 2,400 consumers and feedback from 80 advertising executives worldwide collected in conjunction with Bonn University’s Center for Evaluation and Methods.